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By Root 1117 0

government, which were invited to police and check the excesses of City Hall—often did not blow the whistle. They chose to certify that Beame’s last budget was “technically balanced,” winking at the city’s use of gimmicks which included the ten years the state legislature and the Governor granted the city to remove expenses from the capital budget.* But by that definition, each of the last seventeen city budgets would have been balanced as well. In truth, all the actors now had a stake in demonstrating the city’s progress, in justifying their own efforts, in convincing Washington the city deserved more aid. A fraternity was formed—the watchers and the watched were in it together.

“There was a time in 1975 and 1976,” recalls a former state official who was then an architect of the rescue efforts, “when all of us were very honest and called a spade a spade. Now we’ve gone back to buttering the apple even when we know it’s rotten.”

Seeing the firestorm unleashed by their 1975 opposition to city loans—FORD TO CITY: DROP DEAD, declared the October 30, 1975, front page of the Daily News—President Ford and Treasury Secretary Simon in 1976 began extolling “the progress the city was making.” Seeing how Ford was trounced in New York in the 1976 election, the Carter administration maneuvered to avoid the appearance of placing unpopular pressure on City Hall. Beame had a political stake in advertising the progress made under his tutelage. Governor Carey, Chairman of the Control Board, had a political stake in freeing himself from unpopular city decisions so he could plan his 1978 reelection campaign. Comptroller Goldin was scheming to run for state comptroller in 1978. Felix Rohatyn had a three-year record to defend, and was eager to return to private life before his financial artifice collapsed. The banks had investments to protect and an interest in keeping the city afloat until the statute of limitations expired on potential noteholder suits in 1982. The unions worried that bankruptcy not only would threaten their pension fund investments but might permit a judge to abrogate all of their contracts, something the state constitution prohibited—except in case of bankruptcy. The Times and the News, without informing their readers, purchased MAC securities and, more often than not, lauded their local gladiators. The only persistent and informed opposition to this fraternity of interests came from Wisconsin’s Senator Proxmire. By June 1978, he was complaining of an inability to locate people of substance to testify against New York’s request for an extension of seasonal loans and for $2 billion of federal loan guarantees.

New York’s economic and social indicators did not appreciably change during the first three years of the fiscal crisis, despite Mayor Koch’s ludicrous claim that the city was on the brink of a “renaissance.” Yes, the local economy showed a gain of 7,000 private jobs from February 1977 to February 1978, the first gain in eight years. But one year does not make a trend. The city’s job growth in this year was, we should note, the slowest of any major city in America. And it came in a period when the nation’s economy was expanding at a faster rate than projected for the remainder of this decade. And the Bureau of Labor Statistics continued to predict future job losses for New York. The Economist, an admired British publication, completed a twenty-two-page survey of the city’s economy, optimistically concluding: “New York is not so much declining as changing.” The survey was trumpeted by those who affix Big Apple stickers to their lapels. The weakness of this upbeat analysis is that it focused on mid-Manhattan, which is not New York (except to the British chap who wrote the survey). The hotel and restaurant and retail and foreign investment boom in Manhattan is foreign to the other four boroughs, which comprise 80 percent of the city’s population and 93 percent of its land mass.

There was little prospect that the conditions which made New York unattractive for many businesses and for people with the means to move—high